Analysis and criticism of America's most prominent public intellectual and champion of Keynesian economics. I am part of the Austrian School of Economics, and I critique Krugman's writings from that perspective.

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Monday, May 2, 2011

Bailouts, Blunders, and Bad Policies

While Paul Krugman's column for May 2 is not exactly coordinated with the nearby editorial, "The Economy Slows," there is correlation if one looks for it. For both Krugman and his editorial bosses, it is all about government magically "fixing" the economy by new spending, new regulations, and creation of new "money."

Krugman is engaging in his usual political talking points, today excoriating the Republicans for what he claims is weakening of the new financial regulations, while the editorial writers bemoan for the umpteenth time that the economy, well, sucks. And if that were not enough, Krugman even reaches back to the hoary claims that this whole crisis came about because the Bush administration did not bail out...Lehman Brothers. Yeah, had the government just written a big, fat check for Lehman, all would be well today.

Now, I have no desire to get into the minute details of financial regulation, except to say that every regulatory initiative before has ended up creating cartels of people who ultimately have privileges above everyone else in the industry because of political connections. Economists have long established the unholy relationships between the regulators and the regulated, and while Krugman might persist in claiming that the Sainted Elizabeth Warren will "reinvent" regulation, here is betting that human nature wins (as it always does).

Furthermore, Krugman really wants us to believe that one of THE causes of the crisis was foreign exchange swaps. Good grief! Uh, can someone spell "H-O-U-S-I-N-G B-U-B-B-L-E, or did foreign exchange swaps create that crisis, too?

In the late 1970s, if one actually goes back and reads the financial literature of the time (as opposed to depending upon Krugman and his employer to give us an accurate depiction of that era), the push for deregulation was NOT ideological. The heavily-regulated banking "cartel" was struggling in the face of double-digit inflation, as people were taking money from low-interest bank accounts and putting money into highly-liquid money-market accounts that were coming into play and paying higher rates of interest than were the banks.

On the investment banking side, Michael Milken was pioneering high-yield and (supposedly) high-risk bonds (derisively called "junk bonds") that were doing an end run around the regulated system that could not and would not finance a number of new high-technology ventures. (Krugman leaves out that point because it does not fit into his narrative.) Entities like MCI and CNN were among these firms Milken helped to finance.

Are you reading this on a cell phone? The banking cartel that Krugman claims was working just fine would not touch the new cell phone industry that turned to Milken and his investment banking firm. Yes, Milken was doing an end run around the regulated system and the banks wanted a piece of it. (And they got Rudy Giuliani, who had his own political aspirations, to go after him with bogus criminal charges -- something admitted by one of Giuliani's lieutenants in a speech to Rutgers University law students.)

I include these points because Krugman really believes that if we only could go back to the days when trucking, airlines, railroads, telecommunications, and financial institutions were "regulated" into tiny, neat cartels, that everything today would be just great. Well, if the old system that Krugman praises were in existence, we would not be reading this, as there would have been no Internet for Al Gore to have invented.

Why? Because we still would be routing telephone calls through strands of copper wire instead of using fiber optics, as the regulated firms did not want to have to switch to anything that would deprive them of their full depreciation write-downs for tax purposes. Oh, and long-distance calls most likely would be about a dollar a minute instead of, in most situations, zero cents.

But, Krugman and his employer really seem to believe that the way to revive this economy is to turn back the clock to the regulatory structure of the 1930s, as though shrinking the economy by creating new cartels (which, by definition, limit output) through regulation. Oh, and government would simply depend upon the Fed to create new money in order to try to hide the fact that the regulatory side of government is making the economy contract.

Funny, the NYT editorial complains that inflation is of the "cost-push" variety, which means that higher prices are the result of higher prices, which is a logical absurdity. But absurd is the new watchword today. Shrink the economy, print money, create new cartels, limit technology, and out of that will come an economic version of the Shining City on the Hill.

(Yes, I need to address what went wrong in the financial deregulation, and why the system ran into the ground. Needless to say, I believe that the history of the past 30 years is not as simple as the "good regulation, bad freedom" story that Krugman and his ilk are telling.)

35 comments:

Mr. Andersons - here's some more free advice. I get it you, you're not an economist You're a spokesperson for a ideology. That’s fine. You clearly have a right to your opinions and world view. But please. Pretty please, with sugar on top, please stop making things up. You are not entitled to your own facts. At least Krguman provides links that sort of support the gibberish his supports. You? You just keep typing away.

"Now, I have no desire to get into the minute details of financial regulation,"

Because this would require knowledge of the capital markets.

"Are you reading this on a cell phone? The banking cartel that Krugman claims was working just fine would not touch the new cell phone industry that turned to Milken and his investment banking firm."

You're exactly right Mr. Anderson (I can't bring myself to call you a Prof. anymore since the only thing I have learned form this blog is how to be depressed about public education) Milken funded Motorola, NMT, and even funded NTT's first scaled build out of a wireless network in Japan. He funded Ameritech, the first wireless network ever in the US in the 70's. Oh wait, NO HE DID NOT. All of these events happened years, even decades, before Drexal touched MCI. To even imply Milken and/or MCI are solely responsible for modern day communications is complete and utter nonsense. Learn some history. Some facts. Oh wait. Facts are not allowed when they disagree with your ideology.

"And they got Rudy Giuliani, who had his own political aspirations, to go after him with bogus criminal charges"

Proof please? Links?

"something admitted by one of Giuliani's lieutenants in a speech to Rutgers University law students"

Proof please? Links?

Here's some facts about Milken. He paid over $1.1B in fines etc for his involvement in criminal activates. Do innocent people with abundant means and resources agree to pay this kind of penalty? Not sure. These are just the facts.

http://en.wikipedia.org/wiki/Michael_Milken

Oh, this may be helpful as well.

http://en.wikipedia.org/wiki/Facts

It's really sad when a random poster on your blog can spend 5 minutes refuting the nonsense a PHD 'economist' posts on his blog. This is truly embarrassing for an academic. You really should be on Fox News.

"It's really sad when a random poster on your blog can spend 5 minutes refuting the nonsense a PHD 'economist' posts on his blog. This is truly embarrassing for an academic. You really should be on Fox News"

"Krugman even reaches back to the hoary claims that this whole crisis came about because the Bush administration did not bail out...Lehman Brothers. Yeah, had the government just written a big, fat check for Lehman, all would be well today."

No, thats not what he said. He said that letting Lehman Brothers made a bad situation worse.

"that every regulatory initiative before has ended up creating cartels of people who ultimately have privileges"

Proof please. This is just an assertion. And, show me that your utopian society held together by property rights and the police alone will also prevent privilege.

So why do we have police? That is a non-starter for any argument that accepts room for politics. Because people are bad, selfish and short-sighted any attempt at creating a social order is flawed so we should forget about trying?

"Krugman really wants us to believe that one of THE causes of the crisis was foreign exchange swaps. Good grief! Uh, can someone spell "H-O-U-S-I-N-G B-U-B-B-L-E, or did foreign exchange swaps create that crisis, too?"

There's even a contradiction in your own statement - one of the causes! That is exactly what Krugman says and has written extensively about the global housing bubble.

"Krugman really believes that if we only could go back to the days when trucking, airlines, railroads, telecommunications, and financial institutions were "regulated" into tiny, neat cartels, that everything today would be just great."

No, thats you assuming that is what he wants. In today's post he is talking about financial regulation. And you assume that if we allowed historically unprecedented deregulation of all industries, somehow it would magically all work out for the best. At least Krugman can back his ideas up with empirics, while Austrians still largely reside in their own heads.

It's like this, AP. You might want to find some quotes from one of Rudy G's lieutenants, like the one that Candice Jackson and I found and put in this paper:

http://mises.org/journals/jls/19_4/19_4_2.pdf

Oh, and Giuliani threatened to prosecute Milken's brother, father, and grandfather. Also, the Supreme Court's decision on a similar case in overturning a verdict is where I found where the court defined those things that were not crimes.

So, the next time you call me a liar on this blog, get your facts straight. As for financial deregulation, it came in earnest during the Carter administration. Look at the sponsors of the bills. I have more in a paper I wrote with a colleague here:

http://www.cevroinstitut.cz/upload/file/NPPE/NPPE_6_1.pdf

Deregulation was a very large package, and it included airlines, trucking, railroads, and financial institutions. Most of the heavy lifting was done by the Democrats, and much of it had a good economic effect.

Unfortunately, with financial deregulation, if one does not get rid of the moral hazard, then one can expect problems.

"He paid over $1.1B in fines etc for his involvement in criminal activates. Do innocent people with abundant means and resources agree to pay this kind of penalty? "

Thats seriously your logic? Thats fucking pathetic. Do you just assume when the government points its finger at someone they must be guilty? I mean if thats the case why even have trials? Just take the government's word that the defendant is guilty and we can all sleep better and save alot of time right?

Go read prof anderson's other blog about prosecutorial misconduct and this sort of shit will stop dribbling out of your mouth.

You want to call him out on the cell phone companies fine. I dont have a clue about any of that and id be the first to admit it, but assuming someone is guilty because the government said so is the actions of a lobotomy patient.

""that every regulatory initiative before has ended up creating cartels of people who ultimately have privileges"

Proof please. This is just an assertion."

Google mattel and lead testing. They lobbied legislation to make lead testing mandatory in toys then wrote themselves a loophole that only they could comply with.

"show me that your utopian society held together by property rights and the police alone will also prevent privilege."

Are you willing to let us try? Because if you just keep asserting that it will never work without a violent gang to make everyone behave your requests for evidence to the contrary are meaningless.

"Because people are bad, selfish and short-sighted any attempt at creating a social order is flawed so we should forget about trying?"

Because people are bad, selfish, and short-sighted you probably shouldnt want them in charge of your life. Also there is a vast difference between "creating" or "designing" a social order and letting a social order develop voluntarily and peacefully.

@Gerald Meaders: I read your blog, nothing but ad hominem attacks on anyone who studies economics, whether Keynesian, Austrian, or otherwise, with an especially concentrated vitriol towards those who espouse the values of freedom.

Next time you spam your blog, try to provide something of substance that won't disappoint. Even the layout was sickening to look at. It makes me recall those old geocities conspiracy sites that were slapped together in 20 minutes in order to get pageviews. Then again, that may have been your philosophy when making it.

I was skimming through this, when I came to the snide comment about Al Gore "inventing the internet."

You see, when someone shows their utter ignorance and/or disregard of an unequivocally proven fact, it collapses their entire premise.

Al Gore never said he "invented the internet." You can confirm that in about ten seconds on Google. (He did, however, help pass legislation that enabled the internet, for which he was recognized by the organization that runs the internet -- you can look that up too.)

So, having confirmed your ignorance and/or conscious disregard of a demonstrable fact, I see no reason to waste another moment on your drivel.

I do find it interesting that the anonymous 6:29 wants to claim that the Austrian School consists of Nazis. Ludwig von Mises was considered to be an enemy of Hitler's regime, as well as others in Vienna who were close to Mises.

I'm not sure how a belief that governments should not be in the business of using coercion to direct the economy toward certain political purposes translates into National Socialism, but there it is.

As for Gore and the Internet, that is not the real joke. The commenter is correct and I use the "invented" part tongue-in-cheek. However, Gore also claimed during his Clinton administration days to have "reinvented government." Now, THAT IS a joke.

That the guy could go around claiming that by making a few tiny changes in government agencies that he had "reinvented" the apparatus of state control really is beyond hubris.

Speaking of economic and historical illiterates, we have L. Randall Wray on the Great Depression.

"For exhibit B, we have economist L. Randall Wray, who wrote a blog post with a title that leaves nothing to the imagination: "Modern Budget Cutting Hooverians Want a Return to the 1930s." Wray informs us,

Our modern Hooverians would like to return to the "good old days" of President Hoover, when the government was smaller and both unwilling and unable to offset the swings of private investment spending. Back then, when investment collapsed unemployment did not go to 9 or 10 percent, it went all the way to 25 percent. Hooverian economics would turn back the clock to ring in another Great Depression with the same old pre-Keynesian ideas that failed us in the 1930s."

I’ve sadly come to the conclusion that no non-Austrian can comprehend the basic concepts of the Austrian School, the ignorance of acting man, subjective value and the essential nature of the pricing process. Thus, the anti-Austrian critique always misses the mark. I don't think that the Austrian concepts are particularly complex or obscure, so I fail to comprehend this continuing ignorance.

Director and producer John Papola of the new (and old) Hayek/Keynes rap video has an excellent takedown of the Keynesian that they will fail to comprehend:

It seems to me that once you adopt the top-down Keynesian methodology to the studying economics where “aggregate demand” and “aggregate supply” take the place of actual individual choices and market processes, the step toward planning is indeed easier to make. For this reason, I like to call Keynesianism economics without people or prices.

*******

How do Keynesian administrators decide where to spend the money? They can’t buy “aggregate supply”. There’s no “aggregate supply” store from which to “aggregate demand” some “goods in general”. Each of these terms are ex-post accounts. They’re abstract summaries.

"It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization." --Mises

No Bob, we get it. We just don't buy it. I know it feels good to speak a "secret language," but that is all it is. In the end most Austrians can't build anything that looks like a cumulative social science without loosening their own definitions or just engaging in anecdotal theorizing.

The 11:28 poster is taking a quote from Mises and leaving out the context. (Why am I not surprised?)

Mises said this in relationship to what he believed would be an even worse fate for Europeans: communism. At least the Fascists wanted to hold onto some of the traditions of the German people, whereas the communists wanted to uproot and destroy all of the past.

However, when one reads Omnipotent Government, one understands that he is not defending Hitler and certainly does not defend the opponents of freedom.

I don't know the commenter's ideological background and won't speculate on it. However, when I was in college, the modern historical figures who received the most praise included Stalin, Mao, Ho-Chi-Minh, and Pol Pot. These men murdered millions upon millions, and yet I would bet that the professors who praised them to us would have claimed to be defenders of liberty.

The quote from Mises about fascism refers to a specific incident in Italy where the triumph of Mussolini stopped a probable takeover by Soviet/Khmer Rouge style mass murdering commies.

http://mises.org/journals/jls/12_1/12_1_1.pdf

It is taken completely out of context and is defamatory. What else can one expect from Keynesians other than lies and fraud? Essence of Keynesianism is lies, fraud and theft. Mises wrote volumes about the similarities of fascism and communism and noted that almost everyone in Europe in the 1920s was either one or the other. Look at what followed. Ideas have consequences. Further, Hayek’s “Road to Serfdom” explains that fascism is a form of SOCIALISM and state economic planning.

Mike Cheel's question is important. There is NEVER any evidence that Keynesians "get" basic Austrian analysis. Ever. The essence of Austrian analysis is the LACK OF INFORMATION available to everyone. Keynesian schemes require a magic bureaucrat who has this special knowledge that no one has or can have. Keynesians are too dimwitted to realize that the presumption of an omniscient bureaucrat is the essence of their silly schemes. They are completely unable to engage in the debate on the core issues.

There has been no evidence that AP Lerner, "Lord Keynes" nor any other anti-Austrian commenter on this or any other blog have the slightest familiarity with these basic Austrian concepts.

"Mises said this in relationship to what he believed would be an even worse fate for Europeans: communism. At least the Fascists wanted to hold onto some of the traditions of the German people, whereas the communists wanted to uproot and destroy all of the past."

Well, that makes it alright then!!

"However, when one reads Omnipotent Government, one understands that he is not defending Hitler and certainly does not defend the opponents of freedom."

Correct. Because he was writing in 1927. Mises principally has in mind the Italian fascism of Benito Mussolini, who had become Prime Minister of Italy in 1922.

The full quote:

"It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error” (Mises 1978: 51).

Find me a passage in Keynes' writings where he declares:

"The merit that Fascism has thereby won for itself will live on eternally in history.

But it gets worse: before 1934 Mises had become an economic adviser to the Austro-fascist Dollfuss (see Hans-Hermann Hoppe, “The Meaning of the Mises Papers,” Mises.org, April 1997, http://mises.org/freemarket_detail.aspx?control=137).

"The merit that Fascism has thereby won for itself will live on eternally in history.

Try the intro to the 1936 German edition of the pederast's "General Theory (of Hoodoo). Your namesake loved totalism. Many Western leaders envied Hitler and Mussolini, approved of their behavior, and publicly praised their fellow thugs.

"But it gets worse: before 1934 Mises had become an economic adviser to the Austro-fascist Dollfuss (see Hans-Hermann Hoppe, “The Meaning of the Mises Papers,” Mises.org, April 1997, http://mises.org/freemarket_detail.aspx?control=137).

Does this mean that you will condemn all of the Keynesians, MMTers, and other professional economic wrong-artists who work for the fascist death cult known as the US central government? At least Dollfuss was not much of an international predator.

I looked this Dollfuss thing up a few weeks ago. Mises was advising Dollfuss to accept an international loan, an act that probably wasn't all that Rothbardian, but only because it would have forced some spending cuts no one had the guts to cut. Soon after that, Mises left for Switzerland and Dollfuss was killed by local Austrian Nazis.

LK will want to link the spending cuts and attempts at "austerity" to Auschwitz and Sherman's slaughter of dogs. His entire M.O. is to find apparent disagreements and inconsistencies between various Austrian style writers (and then announce the demise of the Austrians) instead of addressing basic Austrian truths directly.

Let's quote the great controller himself:

The theory of aggregate production, which is the point of the following book, nevertheless can be MUCH EASIER ADAPTED TO THE CONDITIONS OF A TOTALITARIAN STATE than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire.

Mises had been a long term informal adviser to the Austrian government which had long been Catholic/fascist economically and rarely listened to him and then advised a short-term leader who was killed by the Nazis. Keynes sent a love letter to Hitler in 1936.

We've won this war. Our opponents have nothing. They are little chihuahuas nipping at our ankles.

"The second is Gerhard Jagschitz, a historian who teaches at the University of Vienna (where Mises also taught). In addition to his books on Austrian wartime history, Jagschitz wrote his doctoral dissertation on Engelbert Dollfuss, the Austrian Chancellor who tried to prevent the Nazis from taking over Austria. During this period Mises was chief economist for the Austrian Chamber of Commerce. Before Dollfuss was murdered for his politics, Mises was one of his closest advisers."

Let's admit it. Mises and Machlup seemed to think Dollfuss was better than electing crazed socialists or Austrian Nazis. They seemed to think that the Austrian Nazis would have won an election in 1933. Still, they saw the future of Austria as completely hopeless as public opinion was either hard socialist or Austrian Nazi (and anti Jew) and they soon left Austria forever.

LK has completely refuted the entire Austrian School tradition. Bravo.

In fact, even if Mises expressed sympathy and support for some kinds of fascism, that is irrelevant to the question whether his economic theories are right or wrong, and whether his economics should be implemented today.

That is the proper response any intelligent Austrian should make.

And whatever Keynes thought about fascism is irrelevant to the question whether his economic theories are right or wrong, and whether his economics should be implemented today.

As I have already said:

Now does all this prove that Mises’s extreme free market economics are wrong, merely on the basis of his contemptibly stupid views on fascism? Of course not. To argue so would be an unsound ad hominem argument, as invalid as the lazy Austrian ad hominem attacks on Keynes. But it certainly does not reflect well on Mises’s personal opinions and the morality and consistency of his political views.

The difference between Mises and Keynes is simple and self evident. Mises supported with trepidation an "authoritarian" regime in lieu of democratically elected mobs of either socialists or Austrian Nazis whose regimes would be just as illegitimate as the STÄNDESTAAT. He soon left Austria forever.

Keynes, on the other hand, announced to the world that his proposed system WOULD WORK BEST IN A TOTALITARIAN ENVIRONMENT. That is impossible under a Rothbardian system because the highest value of such system is the non-aggression principle. Economics (and whether "the best" outcomes might arise therefrom) is secondary. Keynes announced, in essence, that the statist program trumps everything and that human rights are secondary, or tertiary or (most likely) don’t exist at all in the face of wise guidance from the Keynesian elite.

"Mises supported with trepidation an "authoritarian" regime in lieu of democratically elected mobs of either socialists or Austrian Nazis whose regimes would be just as illegitimate as the STÄNDESTAAT. He soon left Austria forever."

Ah, he did rather more than that. he declared:

"The merit that Fascism has thereby won for itself will live on eternally in history."

He was wrong and a disgrace.I am surprised that you persist in defending a remark that should be condemned.

"Mises said this in relationship to what he believed would be an even worse fate for Europeans: communism. At least the Fascists wanted to hold onto some of the traditions of the German people, whereas the communists wanted to uproot and destroy all of the past."

And yet, that didn't pan out very well, did it? The fact that Mises is giving even some kind of credit to fascism suggests that: a) He is extremely ignorant about fascism or b) His hate of communism is enough to support a military dictatorship to squash it. Either is enough to cast doubt on the validity of the Austrian school.

Here's another gem from Mises:

Only under the fresh impression of the murders and atrocities perpetrated by the supporters of the Soviets were Germans and Italians able to block out the remembrance of the traditional restraints of justice and morality and find the impulse to bloody counteraction. The deeds of the Fascists and of other parties corresponding to them were emotional reflex actions evoked by indignation at the deeds of the Bolsheviks and Communists.

So he's not a full-blown brownshirt, but he's certainly a fascist sympathizer. Again, his argument is that the communists did bad things, so it's ok if the fascists do bad things against them, regardless of the innocent lives that are lost. If he applied what he spouted off in his axiomatic principles, then he should have seen that as equally, if not more, immoral. Then again, Mises also supported forced conscription, so I guess this really shouldn't be a surprise.

"I don't know the commenter's ideological background and won't speculate on it. However, when I was in college, the modern historical figures who received the most praise included Stalin, Mao, Ho-Chi-Minh, and Pol Pot. These men murdered millions upon millions, and yet I would bet that the professors who praised them to us would have claimed to be defenders of liberty."

Ah, another libertarian ad-hominem attack. It's a bit ironic that you accuse Krugman of following blind ideals, yet then label your debators as such. Nowhere did I claim that I followed the likes of people like Stalin, nor have I ever endorsed socialism. But again, this isn't surprising, as I've been called a statist by libertarians for not supporting 9/11 truther theories.

Mises’ quote is taken completely out of context. He’s clearly and merely saying that the pre-Hitler form of fascism halted the spread of Stalinist mass murdering Communism in Italy. He's also clear that fascism is brutal because fascists can't argue or engage in debate (just like socialists) and that fascism will lead to a civilization-ending war.

“Fascism can triumph today because universal indignation at the infamies committed by the socialists and communists has obtained for it the sympathies of wide circles. But when the fresh impression of the crimes of the Bolsheviks has paled, the socialist program will once again exercise its power of attraction on the masses. For Fascism does nothing to combat it except to suppress socialist ideas and to persecute the people who spread them. If it wanted really to combat socialism, it would have to oppose it with ideas. There is, however, only one idea that can be effectively opposed to socialism, viz., that of liberalism. ****

So much for the domestic policy of Fascism. That its foreign policy, based as it is on the avowed principle of force in international relations, cannot fail to give rise to an endless series of wars that must destroy all of modern civilization requires no further discussion. To maintain and further raise our present level of economic development, peace among nations must be assured. But they cannot live together in peace if the basic tenet of the ideology by which they are governed is the belief that one's own nation can secure its place in the community of nations by force alone.

It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error.” Pages 50-51

http://mises.org/books/liberalism.pdf

It's clear from Mises' writings that he saw fascism as a form of socialism. It's also clear that the socialists have slaughters tens of millions more innocent people than the fascists or Nazis. This line of attack on Mises from the statists again proves that they have nothing substantive to say and cannot deal with even basic Austrian concepts.

"He funded Ameritech, the first wireless network ever in the US in the 70's."

Well some very quick research shows that Ameritech was founded in 1983 when Ma Bell got broken up. Yet another AP Lerner factoid turns out to be rubbish.

http://www.privateline.com/PCS/history9.htm

On October 12, 1983 the regional Bell operating company Ameritech began the first United States commercial cellular service in Chicago, Illinois.

Actually, the system above was under trial by Bell Systems (not Ameritech) back in 1975 after the F.C.C. finally approved their use of the 800MHz band (the original application for this mobile network was submitted to government back in 1958, and primitive attempts went right back to the 1940's). It was the bureaucrats that slowed down mobile phone development in the USA by not opening up spectrum.

Meanwhile in Japan, although government plowed heaps of yen into research and development, their system was severely hampered by very slow uptake and high prices. This was caused primarily by the Japanese government granting a monopoly to NTT and preventing foreign competition. By the time they gave up and allowed a competitive market to bring prices to an affordable level, it was the 1980's in Japan as well.

Both countries had a potential headstart, both of them blew it thanks to unhelpful regulation.

Looking at the history of McCaw Cellular Communications, they started buying cellular spectrum licenses in 1983, and eventually purchased MCI Communication's mobile businesses in 1986, so although they were not the first kid on the block (given that Ma Bell had only recently been broken up) they were certainly an early adopter of the technology, and from the perspective of an investment, all of those spectrum licenses are worth many times what they were in the 80's.

I would have to agree with Prof Anderson on this one, Drexel did contribute usefully to the competitive mobile phone marketplace.

@ EkeyraBecause people are bad, selfish, and short-sighted you probably shouldnt want them in charge of your life. Also there is a vast difference between "creating" or "designing" a social order and letting a social order develop voluntarily and peacefully.

Brilliant reply!! I'm stunned that the socialists don't believe we can police ourselves, they should read a book, the west was not wild, and all forms of crime were lower per capita than their "civilized" counterparts in the city who enjoyed organized police protection. Social order always and everywhere evolves on it's own, no state necessary.

About Me

I teach economics at Frostburg State University in Frostburg, Maryland. We are located on the Allegheny Plateau, and we have cool summers and tough winters.
I am the single father of five children, four of them adopted from overseas and I have two grandchildren. My family and I are members of Faith Presbyterian Church (PCA).